How can you relate THIS article with the TOPICS COVERED in class? Please explain, analyze, and discuss in great detail … .

RESEARCH PROJECT

# M I T S M R r e p o r t

R E P R I N T N U M B E R 5 8 3 8 0

Analytics as a Source of Business Innovation The increased ability to innovate is producing a surge of benefits across industries.

SPRING 2017

RESEARCH REPORT

By Sam Ransbotham and David Kiron

Sponsored by:

R E S E A R C H R E P O R T A N A L Y T I C S A S A S O U R C E O F B U S I N E S S I N N O V A T I O N

Copyright © MIT, 2017. All rights reserved.

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AUTHORS

CONTRIBUTORS

SAM RANSBOTHAM is an associate professor in the Information Systems Department at the Carroll School of Management at Boston College, as well as guest editor for MIT Sloan Management Review’s Data & Analytics Big Ideas initiative.

DAVID KIRON is the executive editor of MIT Sloan Management Review.

Nina Kruschwitz, senior project manager, MIT Sloan Management Review

The authors conducted the research and analysis for this report as part of an MIT Sloan Management Review research initiative sponsored by SAS.

To cite this report, please use: S. Ransbotham, D. Kiron, “Analytics as a Source of Business Innovation,” MIT Sloan Management Review, February 2017.

ANALYTICS AS A SOURCE OF BUSINESS INNOVATION • MIT SLOAN MANAGEMENT REVIEW 1

CONTENTS RESEARCH REPORT SPRING 2017

5 / Resurgence in Competitive Advantage from Analytics

• Channeling the data deluge

• Concentrating analytics on specific business issues

• A tide of innovation

6 / Analytical Innovators at a High-Water Mark

8 / Navigating Data-Driven Innovation

• Beyond incremental improvement

• Functional areas that excel with data

10 / Sharing Data Accelerates Innovation

• Creating passages between organizations

• Data governance liberates opportunity

• Smart machines create more time for innovative thinking

14 / Conclusion

16 / Acknowledgments

ANALYTICS AS A SOURCE OF BUSINESS INNOVATION • MIT SLOAN MANAGEMENT REVIEW 3

Analytics as a Source of Business Innovation

N ot long ago, Keith Moody was the only data analyst at Bridgestone Americas Inc. He was located in the credit division in Brook Park, Ohio, and saw analytics take off — in other companies. When Bridgestone Americas named a data-savvy executive, Gordon Knapp, as chief operating officer in March 2014, Moody was given the opportunity to build a new analytics department for Bridgestone Retail Operations, the company’s U.S. network of tire and

auto repair stores. Today, Moody reports to the interim president, Damien Harmon, as director of analytics for Bridgestone Retail Operations, where he is making up for lost time.

Moody’s team is influencing management practice in virtually every part of the organization. Work- ing with the real estate department, the analytics team pinpoints the best locations for new stores. Working with operations, it automates provision of inventory to 2,200 stores.1 Working with human resources, it determines the best allocation of 22,000 employees so that Bridgestone retail locations have the right people on-site to deal with peak demand — and don’t have workers sitting around with time on their hands. What’s more, Moody’s team is looking for ways to use driver data, such as odometer readings and other telematics data, to encourage car owners to come in for new tires or a tune-up before they hear a rattle under the hood and have to look for the nearest repair shop. This new reliance on analytics to inform executive decision making and to develop new services reflects a cultural shift for Bridgestone’s operations in the United States.

What’s happening at Bridgestone provides a window into the state of analytics across industry. After years of enthusiasm and frequent disappointment, a growing number of companies are developing the tools and, increasingly, the skills to move beyond frustration. They are progressively able to ac-

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R E S E A R C H R E P O R T A N A L Y T I C S A S A S O U R C E O F B U S I N E S S I N N O V A T I O N

cess large pools of data and use analytics to inform decision making, improve day-to-day operations, and support the kinds of innovation that lead to stra- tegic advantage and growth.

MIT Sloan Management Review’s seventh annual data and analytics survey, conducted during 2016, reveals a sharp rise in the number of companies re- porting that their use of analytics helps them beat the competition. These survey results include re- sponses from 2,602 managers, executives, and data professionals from companies around the globe. (See “About the Research.”) The findings reverse a three-year trend in our survey data (2013-2015), in which fewer companies year over year reported a competitive advantage from their use of analytics.

So, why the reversal? What changed? Our findings offer clear signals that companies are increasing their use of data and analytical insights for strate- gic purposes and are using data and analytics to

innovate business functions as well as entire busi- ness models. Indeed, analysis of our survey results and interviews with more than a dozen executives and scholars indicates that the ability to innovate with analytics is driving the resurgence of strategic benefits from analytics across industries. In this re- port, we delve into the enablers of innovation with analytics and find that data governance capabilities, especially around data sharing and data security, form the foundation for these innovation processes.

The four key findings from our research are:

• More companies report competitive ad- vantage from their use of data and analytics, re versing a three-year trend. According to several indicators in our 2013, 2014, and 2015 surveys, fewer companies were deriving competitive advantage and other important benefits from their investments in analytics than in previous years. According to this lat- est survey, however, that trend seems to have reversed, and more companies are now seeing gains. This is due to several factors, including wider dispersion of analytics within companies and better knowledge of what analytics can do, as well as a stronger focus on specialized, inno- vative applications that have strategic benefits.